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Advisor Managed Accounts

The next evolution in 401(k) plans

Many retirement plan consultants1 believe in the value of personalized 401(k) advice,2 but they have lacked the scale necessary to serve all participants enrolled in a 401(k) plan. With the advancement of technology, consultants can now scale their investment expertise to design advice programs using open investment architecture that takes a much more holistic view of each participant. We3 call this approach advisor managed accounts.2

Advisor managed account service components

The advisor managed accounts approach combines recordkeeping services from Schwab Retirement Plan Services, Inc. and managed account technology from Morningstar Investment Management LLC with the consultant's core competencies to provide customized plan-level portfolios built to a plan sponsor's specific employee base. Delivered this way, advisor managed accounts help empower consultants who are registered investment advisors (RIAs) to further differentiate from their competitors, leverage their unique plan knowledge and expertise, monetize their services, and be an integral part of helping to improve participant outcomes.

Summary of roles and responsibilities

Managed account investment advisor

  • Supports the plan by serving as RIA and 3(38) fiduciary for the advice service
  • Develops firm-level strategic portfolios using the Morningstar Investment Management technology
  • Constructs plan-level portfolios based on the core fund lineup of a client’s plan
  • Determines the participant portfolio assignment methodology and reviews and approves the participant portfolios

Schwab Retirement Plan Services3

  • Delivers integrated recordkeeping service
  • Provides access to and integration with Morningstar Investment Management's managed account technology services, which requires a signed Managed Accounts Technology Services agreement between Morningstar Investment Management and the consultant
  • Guides recommendation4 discussion with participant via interactive website and phone-based interactions with Schwab Advice Associates

Morningstar Investment Management

  • Provides managed account technology services, implementing consultant's portfolios and participant assignment methodology
  • Implements the rebalancing of participant portfolios; supports ongoing portfolio evaluation and adjustment of portfolio assignments by the consultant in response to participants' evolving financial pictures
  • Completes plan and participant data exchanges with Schwab Retirement Plan Services

Managed accounts offer participants a more personalized, data-driven asset-allocation option.

Important information available through the recordkeeping system and payroll file is used to help determine and refine a participant's portfolio recommendation. These multiple data points go far beyond just age and can also include salary, savings rate, account balance, gender (for longevity purposes), residential state (for tax purposes), Social Security estimates, and more.

The components of our3 managed account service include:5

  • Specific investment portfolio recommendations
  • Savings rate recommendations
  • Ongoing professional portfolio management and rebalancing
  • Estimated retirement income projections and progress tracking for each participant (when directed by the plan sponsor)

At Schwab Retirement Plan Services, we help encourage participant engagement and support consultant scalability by facilitating an integrated recordkeeping experience across advice and communication channels, including mobile, web, phone, and paper statements. Participants have access to the online managed account participant tool, which reflects the consultant's plan-level portfolios and incorporates their portfolio assignment methodology, as well as mobile account access with robust transactional capabilities.

Schwab Advice Associates can help facilitate participant access to the advice service through either a phone or virtual 1:1 consultation. Participants can further optimize their investment strategy by providing additional financial information, such as outside retirement assets. Consultants may also use the Morningstar Investment Management technology platform to conduct their own 1:1 advice consultations with the participants in the plan utilizing the managed account service.

When participants choose to provide additional financial information, such as outside retirement assets, they can see how the additional information impacts their portfolio recommendation. They can then choose to either accept or decline the recommendations.

For further customization, we can incorporate the consultant's preferred branding of their managed account service into select participant materials.

We make advisor managed accounts available for retirement plans with assets of at least $20 million. Consultants can build and manage plan-level portfolios using a core fund lineup of index and actively managed mutual funds, collective trust funds, or exchange-traded funds.

An exchange-traded fund lineup requires Schwab Bank Savings as the capital preservation option to satisfy intra-day liquidity requirements; mutual fund lineups may use Schwab Bank Savings, eligible money market funds, or stable value funds available on the Schwab Retirement Plan Services platform as the capital preservation vehicle.6

Plan sponsor implementation of advisor managed accounts requires a plan reset with managed accounts as the intended qualified default investment alternative (QDIA).

The consultant negotiates their compensation through their agreement with the plan sponsor. Schwab Retirement Plan Services can operationally support a variety of payment structures. Please contact your Schwab Retirement Plan Services representative for details.


Advisor managed account fact sheet
Download PDF

Introducing advisor managed accounts
See the press release

Managed account services available through Schwab Retirement Planner®
Download brochure

Steve Anderson describes advisor managed accounts in PLANSPONSOR
View the article

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